Out Sourcing

Outsourcing is a management solution to utilize the services of external organizations to bring about internal efficiencies at lower costs. Today most organizations realize that they have certain core competencies which enable them to grow in the market. At the same time they realize that within the organization they have functions which can be more efficiently handled by outsourcing to specialists.

Some of the most well known solutions in the outsourcing space are client interaction or client facing functions which are better known as the BPO or Business Process Outsourcing. Outsourcing has been utilized by organizations in the US since the early 1980’s. With the advent of better, cheaper and reliable communication solutions, the location of the service providers became less important, hence the location of the organization providing outsourcing solutions became less important. The determining factors in choosing outsourced suppliers became quality, cost effectiveness and scalability.

The outsourcing of services got a greater boost in the nineties with the advent of better, cheaper and more reliable communication and networking solutions. Location no longer was the key criteria in determining the outsourced vendor. Hence large American corporations started utilizing the services of companies in places like India for their outsourced work. India became a favored destination on account of its huge skilled manpower base, well educated in English and working at lower wages. All these factors combined to give a cost reduction of up to 50% for similar services in the US. Thus off shoring (sending your outsourced work to different shores; “off-shored”) became a reality.

For many, off-shored and outsourced, is an interchangeable term which is not quite true. Any work outsourced to a company in the same country is not off-shored.

As outsourcing has acquired its own legitimacy, various types of outsourcing assignments and fields have opened up such as KPO and RPO.

The RPO or Recruitment Process Outsourcing is a form of outsourcing where an organization out sources its recruitment activities to an external service provider. The aim being to have an external company manage the entire recruiting process, from job profiling to on boarding. The objective of utilizing an RPO is to lower a company's time to hire, increase the quality of the candidate pool and reduce cost.

One may wonder “so what’s new in an RPO? Temporary staffing has been around for decades”. In the RPO model the complete process is managed by an external organization while in temporary staffing, the recruitment model is owned and managed by the hiring company. Thus the biggest difference is in “Ownership”.

The RPO industry owes its origin to the phenomenal growth of the IT industry, which required ever greater skilled technical manpower to fuel their growth. The ever greater difficulty in sourcing technical talent was causing a rise in huge payouts to executive search firms. This led companies to examine various steps required to be initiated in reducing hiring and HR costs.

With time as companies embraced the concept of outsourcing more and more, RPOs also gained favor among Human Resource Departments. Originally companies began outsourcing processes associated with benefits, taxes, and payroll. Then the recruitment process itself was considered for outsourcing.

Another important factor in the growth of the RPOs in the US has been the de-regulation of the labor market. There has been a shift towards contract and part-time labor and shorter work tenures. This trend has had an effect of increasing the RPO activity.

The pros and cons of an RPO:

1. A company must provide initial direction and continued monitoring to assure the desired results. Improper implementation and monitoring could result in failure.
2. RPOs may fail to provide the quality or volume of staff required.
3. RPOs may not be able to effectively meet the challenges of hiring for a company which has a negative impression in the work place.

As in any situation where a company opts for outsourcing, the company should be very clear in its objectives, processes and implementation.